The rise of radio is one of the remarkable advertising stories of the Great Depression. In 1929, the country's two radio networks had combined revenues of $18.7 million; by 1939, network volume had risen to approximately $80 million, counting only those advertisers spending more than $100,000 and exclusive of non-network local radio ad volume.
Radio had some advantages: It was free; it could speak to the whole nation at once and came into the home at the flick of a wrist; and, unlike traditional print, it transcended the limitations of illiteracy.
The rise in radio also saw a growth in the number of U.S. agencies, many of which were formed in response to the new medium on the basis of a single major account. Among the agencies founded in this decade that established a strong radio presence for their clients were McCann-Erickson, handling Nabisco, and opened in 1930; William Esty & Co. (Camel cigarettes), D.P. Brother (Oldsmobile) and Campbell-Mithun (General Mills), established in 1933; and Leo Burnett Co. (Minnesota Canning Co.) and Kudner Advertising (General Motors Corp.), founded in 1935.
At first, established agencies took the lead in the new medium: Lord & Thomas for Pepsodent and Frigidaire; J. Walter Thompson Co. for Chase & Sanborn; Batten, Barton, Durstine & Osborn for Wrigley Wrigley Jr. Co.; Young & Rubicam for General Foods; and Ruthrauff & Ryan for Lever Brothers. The most successful agencies became to radio what the major Hollywood studios were becoming to motion pictures&MDASH;a primary production source of U.S. popular culture and entertainment.
Radio had developed in the U.S. as an advertiser-supported medium, and it fell to ad agencies to create the programming that would showcase their clients' products. Y&R supervised the casting, writing and production of the Fred Allen and Jack Benny programs for Sal Hepatica and Jell-O, respectively. JWT did the same for Standard Brands and Fleischmann's Yeast, bringing Edger Bergen and Rudy Vallee to the air. And Lord & Thomas produced "Your Hit Parade" for Lucky Strike cigarettes and later introduced Bob Hope for Pepsodent.
Blackett-Sample-Hummert became the largest radio buyer and producer of all, creating a procession of daytime serial dramas, or "soap operas," including "Oxydol's Own Ma Perkins" for Procter & Gamble Co.
Advertising and the economy
Because national radio buys lay beyond many advertisers' budgets as well as their marketing needs, a parallel system of regional networks and local stations in major markets arose. They served local advertisers as well as national advertisers targeting specific markets through spot buys.
In 1930, marketers in the developed Western economies?and particularly in the U.S.?were in the final stages of a shift in fundamental purpose.
The ability to manufacture goods on a large scale had been essentially accomplished through the development of the production line and the use of cheap, unskilled labor. For the first time in history, the supply of most goods met demand and, in some cases, pushed beyond natural demand levels.
This created a new phenomenon?overproduction?which could cause sudden price drops. In the early years of the Great Depression, government policy was heavily committed to maintaining price levels in the face of a shrinking supply of money. This initially caused manufacturers more than ever to turn their attention to distribution and demand stimulation through advertising.
What was bad for many businesses was seen at the time to be good for the advertising business, especially with the packaged-goods mergers that a short time earlier had created Colgate-Palmolive-Peet, Standard Brands and General Foods, together with their large pools of ad dollars. As shrinking markets slowed the rate of production, however, advertising began to contract as well.
In addition, advertising had problems unrelated to the economic crisis. As an industry, advertising still labored under a negative public reputation formed in the era of patent medicines. It was a problem that major older agencies such as BBDO and Calkins & Holden took great pains to counteract through declarations of principles, self-regulatory agreements and other attempts at institutionalizing responsible behavior. Others in the business regarded such self-imposed restraints as a major interference with the power of advertising to sell.
Major advertisers began moving into radio in the early 1930s with great wariness. Most advertisers seemed conscious that they were selling to people in the privacy of their homes and should behave accordingly; however, not all advertisers did.
In the debate over good taste in advertising, Lucky Strike cigarettes and its agency, Lord & Thomas, became symbolic of everything that was rude and intrusive about advertising. Its campaigns, created under the supervision of American Tobacco Co. Chairman George Washington Hill, were aggressive and endlessly repetitive. Yet many admitted that such advertising had what the March 1930 issue of Fortune called "force."
The state of print
At the start of the decade, print advertising was still the major form of communication. U.S. ad volume in newspapers and magazines stood at about $1 billion in 1929; more than 75% was spent in newspapers while network radio represented less than 3%. Advertising's two main trade publications were Printers' Ink and Advertising & Selling, though neither covered day-to-day news of the industry in any depth. Advertising Age, which soon became the industry's key trade publication, was launched in Chicago by Crain Publishing Co. on Jan. 11, 1930, to fill that gap.
A month after Advertising Age was founded, Time Inc. launched Fortune, targeted to top management. Many major U.S. ad agencies advertised their own services regularly in the magazine.
As most of Europe and the U.S. settled into the worst of the Great Depression in 1932, there was enormous pressure on newspapers and magazines to cut their rates, resulting in rate wars and widespread distrust of circulation claims by advertisers. Lord & Thomas made it a matter of policy that any invoice received from a publication must come with a statement of circulation for the previous 30-day period.
The commission system, which was beginning to take root, became a subject of great controversy as advertisers pressured their agencies as well as the media for rebates and deep discounts. Many had no choice; if they did not cut their rates, a competitor would.
Former JWT executive James Webb Young took an academic post at the University of Chicago and thoroughly studied the commission issue. In 1933, he issued a report, "Advertising Agency Compensation in Relation to the Total Costs of Advertising," supporting the existing 15% commission.
Agencies and media companies applauded it; advertisers, however, turned to their own study by A.E. Haase, a former director of the Association of National Advertisers. The Haase report, issued in November 1934, made the case for a negotiable fee system. The same report, however, conceded some advantages to the status quo.
As the debate continued, the 15% commission system continued to be used, and more advertisers decided to accommodate it. Ultimately, it prevailved.
New horizons: Sports and politics
With national radio at their disposal, advertisers began to look more seriously at sports events as commercial vehicles. In 1934, Ford Motor Co. sponsored the World Series, and Chevrolet bought a series of college games. The following year, Brown & Williamson Tobacco Co. sponsored the Kentucky Derby.
A pattern was set in the mid-1930s for the sports-advertising partnership that came to dominate sports broadcasting in the TV era. No company made a more complete commitment to sports than Gillette, whose agency, Maxon Inc., made a major investment in the 1939 World Series, a move that proved so successful for the marketer that it soon became the largest sports advertiser in broadcasting.
Politics and advertising were first connected during the 1936 U.S. presidential campaign when NBC and CBS each made a decision to sell airtime to the political candidates. Hill Blackett of Blackett-Sample-Hummert directed the radio effort for the Republican Party, creating transcribed dramatizations for such issues as the national debt and high taxes for the working class. When NBC and CBS declined to run the programs because of a policy requiring that everything fed by the networks must be live, the agency placed them on local stations around the country.
The live-broadcast policy created a dilemma at CBS when the agency bought program time on election eve for a "debate" between the influential Republican Sen. Arthur Vanderberg and President Franklin D. Roosevelt, the Democratic incumbent, who was running against Republican Alfred M. Landon. In fact, Sen. Vanderberg was debating recorded excerpts of President Roosevelt's speeches. CBS cut off the program after several minutes on the grounds that it violated the network's ban on recordings, though the network had earlier approved the idea as a "public service exception."
After the election, a Senate committee investigated the 1936 campaign at all levels?local, state and federal?and estimated that the total amount spent was about $50 million. Of this sum, money spent on the presidential contest came to $5.6 million for the Democratic Party and $8.8 million for the Republican Party. However, the vast majority of the money was spent on travel and staff expenses, not advertising.
Application of scientific testing
In a decade in which science played a greater role?in the trend toward streamlining, the rise of commercial aviation and other advances in transportation, and the growth of a national radio system?advertising sought to make itself more scientific as well. Improved sampling and analysis models began to refine the basic techniques of mass market research, and agencies worked with the radio networks to develop more reliable methods of audience measurement, or "ratings."
One particularly controversial technique received a great deal of attention in 1938, when the consulting firm Townsend & Townsend introduced a 27-point system for evaluating advertising copy. For most agencies and advertisers, an ad's copy was judged through trial and error. But for $50,000 in the first year and 1% of the ad budget for the next four years, Townsend said it would unlock the motivational selling codes of an advertiser's ad copy based on its 27 selling elements. It marketed its services directly to advertisers, in many cases putting itself between agency and client.
When Quaker Oats insisted that all its ad copy written at Lord & Thomas be evaluated against the 27 points, agency President Albert Lasker refused to put his experience and expertise up against a "scientific" system. He resigned the Quaker business, dealing a blow to Townsend but not to advertiser curiosity about the motivational factors of copy.
Toward the end of the decade, a revitalized consumer movement began to be felt in Washington. The most far-reaching legislation of the decade was the Robinson-Patman Act of 1936, a response to the growth of chain stores and mass nationwide distributors and the power they exerted over small independent businesses. Discriminatory pricing by large companies was the main target of the act.
Another piece of legislation, the Wheeler-Lee Amendment of 1938, broadened the power of the Federal Trade Commission to move in many directions where advertising promoted and furthered unfair trade practices. For the first time, ad agencies became parties to consent decrees.
In April 1939, President Roosevelt opened the New York World's Fair before an RCA TV camera. TV was further advanced in England at the time, where the government-owned BBC was unconcerned with the economies of sponsorships and ad revenues. In the U.S., agency leaders were doing little else but debating the possible impact of the new broadcasting technology.
Another new technology that came out of the 1930s was frequency modulation, or FM, radio, invented in 1935 by Edwin H. Armstrong, who had been commissioned by NBC Chairman David Sarnoff to build a radio that was free of static.